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WASHINGTON — When Fed chairwoman Janet Yellen speaks with reporters after the Federal Reserve
Board meets this week, investors will look for clues to the answers to two big questions:

When will the Fed start raising short-term interest rates? And how — and when — will it start
unloading its vast investment holdings?

The answers will affect loan rates for consumers and businesses — and perhaps the direction of
the economy. Yet few investors expect to hear anything definitive.

The Fed remains in a wait-and-see position.

Although the central bank has signaled optimism, officials are unsure how much the economy will
strengthen the rest of the year. On Wednesday, the Fed will update its forecasts, and it might
downgrade its 2014 growth estimate. The government said last month that the economy shrank in the
first quarter, depressed by a harsh winter.

Yesterday, the International Monetary Fund predicted that the U.S. economy will grow a modest 2
percent this year, below the IMF’s previous estimate of 2.7 percent.

Yellen has suggested that the U.S. unemployment rate, now 6.3 percent, overstates the health of
the job market and economy. She also has expressed concern that a high percentage of the unemployed
— 35 percent — have been out of work for six months or longer and that pay is scarcely rising for
people who do have jobs.

Yet the Fed is getting closer to acting. The minutes of its most-recent meeting, in late April,
indicated that the Fed has begun discussing the tools it could use to finally pull back the
extraordinary stimulus it has provided the U.S. economy since 2008.

Analysts expect at least one announcement when the two-day policy meeting ends on Wednesday:
that the Fed will make a fourth $10 billion cut in the pace of its monthly bond purchases, to $35
billion. The Fed has been buying Treasury and mortgage bonds to try to keep long-term loan rates
low, to stimulate the economy.

The Fed probably will end its bond purchases this fall, with its investment portfolio nearing
$4.5 trillion. But officials have said that even when they stop buying bonds, they don’t plan to
start selling any. They plan to keep the Fed’s holdings steady by reinvesting as bonds mature. In
doing so, the Fed will still exert downward pressure on long-term rates.

The Fed has said it will keep its key short-term rate at a record low near zero for a “
considerable time” after its bond purchases end. At her news conference, Yellen probably will avoid
being pinned down on how long a “considerable time” might be. Last month, she said the Fed expects
to start raising rates once inflation has risen to the Fed’s 2 percent target rate and it sees
enough progress in restoring full employment.

Most Fed members expect the Fed to start raising short-term rates between mid-2015 and 2016. The
central bank has stressed that even after it starts raising rates, it probably will keep them
unusually low to support the economy.

But Yellen has stressed that she is studying barometers of the job market beyond the
unemployment rate, and by those measures, the job market remains subpar, a reason she has cited for
Fed continued Fed support.

Yellen also has expressed worries that the housing recovery might be faltering. In addition, Fed
officials have discussed such geopolitical risks as slow growth in Europe and Russia’s aggression
toward Ukraine. The newest threat is rising sectarian violence in Iraq, which has sent oil prices
up.